Is SSE planning to exit the domestic energy market?

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In the United Kingdom retail electricity market, SSE has a 14 percent market share and npower 9 percent.

The news follows reports on Monday that Innogy could sell Npower or combine it with a local rival as the business racks up losses and loses customers on the back of customer service troubles and higher costs.

SSE and Innogy - the German owner of npower - said they had been in discussions about combining their gas and electricity supply businesses in the UK.

Shares in SSE rose 3.28% to 1,419.50p on the news in afternoon trading.

SSE said on Tuesday the talks were about merging its household energy supply and services business with Innogy's United Kingdom supply business npower, sending SSE shares more than 3 percent higher and Innogy's up 1.6 percent.

Any deal would likely have significant repercussions on the UK's already competitive energy supply market.

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"In discussions, SSE is mindful of the requirements of customers and the concerns of employees".

As the cap is aimed at standard variable tariffs and default tariffs, it is expected to threaten the profits of some of the larger suppliers. "The combined business would be listed and SSE would demerge its shares to its shareholders", SSE said.

SSE has more than 7.5m customers, and Npower more than 4.5m, although both are losing customers to cheaper rivals.

Npower booked a loss of €109m a year ago and this summer reported a half-year loss of €12m, as owner Innogy warned that a "sword of Damocles" was hanging over the sector due to the threat of Government intervention.

The German firm said it would attempt to counter "very tense" trading for the United Kingdom retail business by driving down costs, but admitted annual earnings would also be stuck in the red.